Terry S. HarvillDecember 10, 2003

electricity market restructuring in illinois

WHAT NEXT?

electricity market restructuring in illinois

WHAT NEXT?

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Cause of the 2003 BlackoutThe Canadian Power SystemThe United States Power SystemOhioToo Much Deregulation of the Electric Power IndustryNot Enough Deregulation of the Electric Power IndustryCaliforniaTerrorismThe War on TerrorismMISO/PJMThe Under-Funding of Alternative Energy ResearchThe War on DrugsThe Supreme Court’s Reversal of Texas’ Anti-Sodomy Laws

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Illinois Experience Since 1997

Status of Restructuring in IllinoisReview of Experience Since 1997Assessing the Benefits for Retail CustomersComparison with Other States

What’s Next???

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Status of Restructuring in Illinois

Electricity Switching Statistics1

Percentage of Customers Receiving Delivery Services

5.0%

70.30%

1.6%

31.20%

1.0%

22.60%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

ComEd Illinois Power Ameren CIPS Ameren UE Ameren CILCO MidAmerican

_________________

1Source: Illinois Commerce Commission

Small C&I Large C&I

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Status of Restructuring in Illinois

34.0%

62.5%

14.0%

53.7%

8.2%

24.0%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Electricity Switching Statistics1

Percentage of Customer Usage Receiving Delivery Services

ComEd Illinois Power Ameren CIPS Ameren UE Ameren CILCO MidAmerican

Small C&I Large C&I_________________

1Source: Illinois Commerce Commission

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Status of Restructuring in Illinois

Ameren Energy Marketing CompanyBlackhawk Energy Services, L.L.C.Central Illinois Light Company (CILCO)Constellation NewEnergyDynegy Energy Services, Inc.EnerStar Power Corp.

Illinois Power Energy, Inc.MidAmerican EnergyPeoples Energy Services CorporationSempra Energy Solutions Sempra Energy Trading Corp. South Beloit Water Gas & Electric Co.Exelon Energy CompanyWPS Energy Services, Inc.

So Who’s Competing?

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Illinois Experience Since 1997

Status of Restructuring in IllinoisReview of Experience Since 1997Assessing the Benefits for Retail CustomersComparison with Other States

What’s Next???

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Review of Experience Since 1997

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Review of Experience Since 1997

Mergers and Acquisitions

Unicom (ComEd) merged with PECO Energy to form Exelon.Illinova (Illinois Power) was acquired by Dynegy.Mid-American Energy Holdings merged with CalEnergy.Mid-American Energy Holdings was acquired by a group of private investors including Bershire Hathaway.CILCORP was acquired by AES.AES CILCO was acquired by Ameren.

Other Transactions

Illinois Power sold the Clinton Nuclear Power Station.ComEd sold all of its fossil generation.

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Illinois Experience Since 1997

Status of Restructuring in IllinoisReview of Experience Since 1997Assessing the Benefits for Retail CustomersComparison with Other States

What’s Next???

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Assessing the Benefits forRetail Customers

Customers have saved over $3 billion since 1998 due to the legislatively mandated rate decreases.

As of May 2002, retail access is available to all retail customers in Illinois.

New generation facilities in Illinois.

Innovative load management programs have created more than 1,600 megawatts of demand side resources.

Eight new transmission lines have been built in Illinois since 1998.

Zion Nuclear Power Station closed.

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New Generation In Illinois

15,000

4,046

7,610

Since 1998 2002 2003 and Beyond0

3,000

6,000

9,000

12,000

15,000

18,000

Meg

awat

ts

28 New Projects

8 New Projects

20 New Projects

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Illinois Experience Since 1997

Status of Restructuring in IllinoisReview of Experience Since 1997Assessing the Benefits for Retail CustomersComparison with Other States

What’s Next???

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Comparison with Other States2003 Performance Review of Electric Power Markets1

For 2003, the number of states that allow retail access remained at 16 states and the District of Columbia.

New Mexico, Oklahoma, and West Virginia continued to postpone retail access.

Arkansas repealed its restructuring law earlier this year.

Nevada and Oregon allow retail access for large customers only.

California suspended its retail access program in September of 2001 and may also repeal its law.

_________________

1Source: 2003 Performance Review of Electric Power Markets, Ken Rose, IPU, Michigan State University, August 2003.

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Comparison with Other States2003 Performance Review of Electric Power Markets1

Many retail markets remain relatively inactive, particularly for residential customers.

However, the overall market activity for larger customers in some states remains strong.

_________________

1Source: 2003 Performance Review of Electric Power Markets, Ken Rose, IPU, Michigan State University, August 2003.

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Comparison with Other States

_________________

1Source: 2003 Performance Review of Electric Power Markets, Ken Rose, IPU, Michigan State University, August 2003.

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Illinois Experience Since 1997

Status of Restructuring in IllinoisReview of Experience Since 1997Assessing the Benefits for Retail CustomersComparison with Other States

What’s Next???

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What’s Next???

What do customers want?

Multi-State Public Opinion Survey

Sample Error: 3.5% at the 95% Confidence Interval

October 15-20, 2003

Focus Groups

November 4, 2003

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What’s Next???

What do customers want?

Voters/Consumers are generally quite pleased with their current electricity provider and are generally content with the overall state of electricity generation and distribution.

The Midwest’s leading electricity power companies have respectable favorability ratings at the present time.

Most of the Midwest’s leading electricity power companies have satisfied customers.

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What’s Next???

What do customers want?

The price and affordability of electricity are not major concerns for a majority of voters/consumers.

Voters see electricity rates as the most reasonable of all their utility bills.

Less than half the voters would view a 25 percent rate increase in electricity prices as a major financial hardship.

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What’s Next???

What do customers want?

The concern over price and affordability that does exist is found among “heavy” electricity users with an average monthly bill exceeding $100.

Voters do not believe that any state in the Midwest is facing an electricity crisis in terms of either affordability orreliability.

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What’s Next???

What do customers want?

The 2003 Blackout was not interpreted as evidence of a flawed or deficient electricity power system.

For the most part, customers were very satisfied with the performance of most of the affected utilities in response to the blackout.

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What’s Next???

What do customers want?

Voters do not see any crisis on the horizon.

– California, Enron, and the blackout have not created any real fear among consumers regarding their energy supply or energy prices.

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What’s Next???

What do customers want?

Most voters/consumers have no real concept of what electricity “deregulation” means nor do they understand how it impacts consumers.

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What’s Next???

What do customers want?

For the vast majority of voters, the passage of electricity restructuring legislation in 1997 was a non-event.

They do not see it as offering them more choices.

They do not see it as having a meaningful impact on energy prices in either direction.

They do not see it as helping or harming reliability.

They do not see it as strengthening or threatening the electricity power infrastructure.

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What’s Next???

In 2004, residential bundled rates will be 20% below 1994 levels on a nominal basis.

How will these prices compare with market prices?What effect will these prices have on competition?

Post-Transition

Will utilities have a continuing obligation to serve?If so, what will be that obligation?

Obligation to Source Only?Who will manage retail customer price risk?

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Contact Information

Terry S. HarvillDTE Energy2000 2nd AvenueDetroit, Michigan 48226

Telephone: 313.235.8816E-mail: harvillt@dteenergy.comWeb: www.dteenergy.com